Decision impact statement
Block & Ors v Commissioner of Taxation
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Court Citation(s):
[2007] AATA 1897
2007 ATC 2735
67 ATR 974
Venue: Administrative Appeals Tribunal
Venue Reference No: WT 2006/754-770
WT 2006/771-774
WT 2006/775-778
Judge Name: Senior Member Sweidan
Judgment date: 26 October 2007
Appeals on foot:
No
Impacted Advice
Relevant Rulings/Determinations:
Subject References:
Income tax
GST
partnership
enterprise
horse racing
horse breeding
sheep breeding
 This document is not a public ruling, but provides a statement of the Commissioner's position in relation to the decision and how the law will be administered as a consequence of the decision. Any proposals for changes in the law are matters for government and it is not appropriate for the Commissioner to comment. |
Brief summary of facts
1. The first applicant (the partnership) was formed in 1996.
2. The second and third applicants are the partners in the partnership.
3. The partnership had carried on horse racing and breeding and sheep breeding activities since 1996 on a property owned by the partners.
4. The partnership registered for GST and lodged business activity statements for the tax periods ended 31 December 2001 to 30 September 2005.
5. The partnership's activities incurred significant losses.
6. The partners claimed deductions for their respective shares of the partnership losses in their individual tax returns.
7. The Commissioner considered that the partnership's activities did not amount to carrying on a business or an enterprise for GST purposes.
8. Consequently, the Commissioner disallowed income tax deductions claimed by the partners for their shares of the partnership losses, cancelled the GST registration and issued assessments of net amounts for the relevant tax periods.
9. Objections were lodged by the applicants and disallowed by the Commissioner. The applicants applied for review of the objection decisions.
10. The Tribunal accepted the evidence given by the third applicant and found that the partnership conducted its activities in a businesslike and commercial manner, preparing and maintaining all appropriate books and records and engaging accountants to prepare the tax returns and accounts for the business. The Tribunal had regard to a range of other matters which included substantial improvements made to the property and the partners' history and experience relevant to the industry.
11. While the partnership incurred significant losses, the Tribunal accepted that these were the result of capital costs in setting up the business, the subsequent restructuring of the business and a series of unforeseeable setbacks.
12. The objection decisions were therefore set aside.
Issues decided by the court or tribunal
1. The first applicant was carrying on a business of horse and sheep breeding at all relevant times and was entitled to be registered for GST.
2. The first applicant correctly returned taxable supplies and creditable acquisitions in its business activity statements.
3. The first applicant was entitled to the deductions claimed in its income tax returns.
4. The second and third applicants were entitled to deductions for their respective interests in the first applicant's net loss incurred in each of the years of income.
Tax Office view of Decision
The Commissioner accepts that the decision is one that was open to the Tribunal on the view of the evidence taken by the Tribunal and will not appeal the decision.
Administrative Treatment
Implications on current Public Rulings & Determinations
None
Implications on Law Administration Practice Statements
None